Performance: Double digit growth across key business lines

• Net profit was up 53.7% y/y to GHS 707.5m, exceeding our estimated figure of GHS 532.7m
• Growth was driven mainly by data which saw a 64.4% y/y increase in revenue to GHS 872m and accounted for 37.1% of the top line
• Despite concerns about the impact of the electronic levy (eLevy) on MoMo activity, it was encouraging to see active MoMo subscribers increase from 10.6m prior to the announcement of the levy to 11.7m in 1Q2022.
• Consequently, MoMo revenue came in at GHS 515m which was 18.9% better than our estimate.
• Voice revenue was pleasantly surprising as growth bounced back to double digit despite the gradual shift in consumer behaviour from voice to data. Voice revenue grew by 16.9% y/y to GHS 785m
• EBITDA at GHS 1.4bn was 46.6% better y/y and 61.4% higher than our estimate. This translated into a 496bp y/y expansion in EBITDA margin to 59.5%

Outlook: Margin compression envisaged but data could mitigate impact

• While earnings momentum continues to exceed our expectations, we are concerned about the potential impact the electronic levy (eLevy) as well as the SMP directive to regulate pricing could have on margins going forward
• From our conversations with management, up to 30% of MoMo revenue could be disrupted due to eLevy. (i.e. decline in transaction volumes and the impact of the 25% reduction in P2P fees)
• Furthermore, with MoMo’s major competitor offering a zero-rated service (i.e. consumers only pay for eLevy charges), we are concerned about consumer behaviour post eLevy implementation.
• Consequently, we expect some margin compression particularly in 3Q2022 when the full impact of eLevy can be assessed.
• Despite the above-mentioned concerns, the significant growth in data is likely to mitigate the negative impact.
• In addition, we are of the view that the market has already priced in the potential disruptions from eLevy given the 24.8% decline in share price since its announcement in November 2021

Valuation: Not rated 

• MTN Ghana is trading at an EV/EBITDA multiple of 2.6x